Market Brief
Soft Asian data kept risk appetite contained overnight. The Japanese GDP growth came broadly in line with market expectations. The gross domestic product contracted by 6.8% q/q annualized according to 2Q preliminary data (vs. -7.0% exp. and +6.1% last (revised)), the domestic demand contribution to GDP fell 2.8%, external demand advanced 1.1%. The consumer and business spending dropped (-5.2% and -2.5% q/q respectively). The GDP deflator advanced significantly from -0.1% to 2.0% (vs. 1.6% exp.), mostly due to sales tax hike in April (from 5% to 8%). The Economy Minister Amari said that the government view remain unchanged after GDP data, and that the economy should continue growing at moderate pace once tax effects begin to wane. The USD/JPY traded mostly ranged, a rapid spike was quickly stopped by solid offers above the 200-dma (102.34). Trend and momentum indicators are perfectly flat, option related offers abound between 102.00/103.00, a break above depends on the global risk sentiment on the back of geopolitical tensions in Middle East and Ukraine. The support zone remains 101.90/102.10, including daily Ichimoku cloud, 21/100-dma. The EUR/JPY remains offered below the 21-dma (137.03). The bias is downwards, with bids eyed at 135.25/75 zone (March-August downtrend baseline / 2014 low hit on Aug 8th ).
In China, new Yuan loans dropped significantly from 1,080.0 to 385.2 billion Yuan in July (lowest since end-2009), the M2 money supply grew at the pace of 13.5% in year to July (vs. 14.7% printed in June). The retail sales increased 12.2% y/y (vs. 12.5% exp. & 12.4% last), the industrial production growth slowed to 9.0% y/y (vs. 9.2% exp. & last). Chinese equities traded mostly in red. Having rebounded from 6.1523 (200-dma & Fib 50.0% on January-April rally), the USD/CNY pared past three session losses and hit 6.1627 onshore.
The AUD/USD was better bid in Sydney as Westpack consumer confidence index rose in August. The upside remained capped at 0.9300 on soft Chinese data. The bias is marginally negative with offers eyed at 0.9300, then 0.9339/45 (Fib support on Oct’14 – Jan’14 pullback / 21-dma). Decent option bids should give support above 0.9200 throughout the day.
We are heading into a critical day for the sterling complex. The June-July jobs data and the quarterly Inflation Report will most likely define the short-term direction in GBP. It is important that wages advance in line with the progress in unemployment rate, for markets to assign hawkish tone regarding the timing of the first BoE rate hike. GBP/USD recovers to 1.6828 in London open. Supportive data/comments should open the way towards the ascending Ichimoku cloud (1.6937/1.7017), option bids trail above 1.6795 for today expiry.
The poor ZEW survey rectified the EUR direction yesterday. There is little doubt about economic weakness in Euro-zone’s periphery, yet the fading hopes that Germany, region’s growth engine, can save the day should certainly keep the selling pressures tight on EUR-complex before Thursday’s CPI and GDP data. Released in the Europe open, German and French CPI came in line with market estimates in July. The EUR/USD’s relief rally remained capped at 1.3373. The sentiment remains bearish with key support zone eyed at 1.3296/1.3333 (Nov 2013 low / 2014 low).
The leading economic events of the day are UK jobs data, quarterly Inflation Report and US retail sales. Traders will be closely monitoring German, French and Spanish July (Final) CPI m/m & y/y, Norwegian June Retail Sales w/ Auto Fuel m/m, UK July Claimant Count Rate, ILO June release for 3-month Unemployment Rate and Weekly Earnings, Italian June General Government Debt, Euro-Zone June Industrial Production m/m & y/y, Credit Suisse ZEW Survey on August Expectations, US July Retail Sales, US June Business Inventories and Canadian House Price Index by Teranet/National Bank.
| Todays Calender | Estimates | Previous | Country / GMT |
| GE Jul Wholesale Price Index MoM | - | -0.10% | EUR / 6:00 AM |
| GE Jul Wholesale Price Index YoY | - | -0.80% | EUR / 6:00 AM |
| GE Jul F CPI MoM | 0.30% | 0.30% | EUR / 6:00 AM |
| GE Jul F CPI YoY | 0.80% | 0.80% | EUR / 6:00 AM |
| GE Jul F CPI EU Harmonized MoM | 0.30% | 0.30% | EUR / 6:00 AM |
| GE Jul F CPI EU Harmonized YoY | 0.80% | 0.80% | EUR / 6:00 AM |
| FR Jul CPI EU Harmonized MoM | -0.30% | 0.00% | EUR / 6:45 AM |
| FR Jul CPI EU Harmonized YoY | 0.60% | 0.60% | EUR / 6:45 AM |
| FR Jul CPI MoM | -0.30% | 0.00% | EUR / 6:45 AM |
| FR Jul CPI YoY | 0.50% | 0.50% | EUR / 6:45 AM |
| FR Jul CPI Ex-Tobacco Index | 125.9 | 126.22 | EUR / 6:45 AM |
| SP Jul CPI EU Harmonised MoM | -1.50% | -0.10% | EUR / 7:00 AM |
| SP Jul F CPI EU Harmonised YoY | -0.30% | -0.30% | EUR / 7:00 AM |
| SP Jul CPI Core MoM | - | 0.00% | EUR / 7:00 AM |
| SP Jul CPI Core YoY | 0.00% | 0.00% | EUR / 7:00 AM |
| SP Jul CPI MoM | -0.90% | 0.00% | EUR / 7:00 AM |
| SP Jul F CPI YoY | -0.30% | -0.30% | EUR / 7:00 AM |
| NO Jun Retail Sales W/Auto Fuel MoM | 0.40% | -0.90% | NOK / 8:00 AM |
| UK Jul Claimant Count Rate | 3.00% | 3.10% | GBP / 8:30 AM |
| UK Jul Jobless Claims Change | -30.0K | -36.3K | GBP / 8:30 AM |
| UK Jun Average Weekly Earnings 3M/YoY | -0.10% | 0.30% | GBP / 8:30 AM |
| UK Jun Weekly Earnings ex Bonus 3M/YoY | 0.70% | 0.70% | GBP / 8:30 AM |
| UK Jun ILO Unemployment Rate 3Mths | 6.40% | 6.50% | GBP / 8:30 AM |
| UK Jun Employment Change 3M/3M | 270K | 254K | GBP / 8:30 AM |
| IT Jun General Government Debt | - | 2166.3B | EUR / 8:30 AM |
| EC Jun Industrial Production SA MoM | 0.40% | -1.10% | EUR / 9:00 AM |
| EC Jun Industrial Production WDA YoY | 0.20% | 0.50% | EUR / 9:00 AM |
| SZ Aug Credit Suisse ZEW Survey Expectations | - | 0.1 | CHF / 9:00 AM |
| UK Bank of England Governor Carney Presents Inflation Report | - | - | GBP / 9:30 AM |
| US Aug 8th MBA Mortgage Applications | - | 1.60% | USD / 11:00 AM |
| US Jul Retail Sales Advance MoM | 0.20% | 0.20% | USD / 12:30 PM |
| US Jul Retail Sales Ex Auto MoM | 0.40% | 0.40% | USD / 12:30 PM |
| US Jul Retail Sales Ex Auto and Gas | 0.40% | 0.40% | USD / 12:30 PM |
| US Jul Retail Sales Control Group | 0.40% | 0.60% | USD / 12:30 PM |
| CA Jul Teranet/National Bank HPI MoM | - | 0.90% | CAD / 1:00 PM |
| CA Jul Teranet/National Bank HPI YoY | - | 4.40% | CAD / 1:00 PM |
| CA Jul Teranet/National Bank HP Index | - | 163.98 | CAD / 1:00 PM |
| US Jun Business Inventories | 0.40% | 0.50% | USD / 2:00 PM |
EUR/USD
R 2: 1.3500
R 1: 1.3431
CURRENT: 1.3363
S 1: 1.3333
S 2: 1.3296
GBP/USD
R 2: 1.7017
R 1: 1.6889
CURRENT: 1.6825
S 1: 1.6757
S 2: 1.6693
USD/JPY
R 2: 103.09
R 1: 102.34
CURRENT: 102.31
S 1: 101.90
S 2: 101.51
USD/CHF
R 2: 0.9156
R 1: 0.9115
CURRENT: 0.9082
S 1: 0.9033
S 2: 0.8970